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Created: 25 September 2017

Sep25

2017

Different Myths on GST

After much preparation, debates, and anticipation; GST was rolled out in India on the midnight of 30th June, i.e. on July 1, 2017. The One Nation One Tax formula is being hailed as a positive measure for India by international agencies like Moody’s and the World Bank. However, as soon as and even before the new GST regime came into force, there has been a lot of skepticism around it. Messages and pictures are doing rounds of WhatsApp and Facebook, demonstrating what a huge menace GST is. So, are these messages about GST myths or do they hold some truth?

We are here to make everything crystal clear for you. Read on to know whether these popular myths about GST have some credibility to them or not.

1. Eating out is more expensive now

Not necessarily. Earlier there was a service tax of 6 % on the total bill amount (for AC restaurants) and a VAT which varied from one state to another. VAT rates differ from one state to another and therefore pre GST and post GST bill amounts may be higher or lower, depending on the earlier VAT rate in a particular state. Further, as the benefits of input tax credit start seeping in, eating out is likely to be cheaper in the long run, and not dearer.

2. Businesses cannot charge GST on manual invoices

Government has issued a clarification stating that you can issue an invoice without using a computer at all. So, yes, it is possible to charge GST on a paper bill/manual invoice. Just make sure it mentions the GSTIN of the entity issuing the bill.

3. Gold is a lot more expensive now

There is some truth to it. Earlier the rate of tax on gold was 2 percent. After GST, the tax rate has been increased to 3 percent. It is still lower than the lowest tax slab under GST which is 5 percent. But, it is definitely higher than before.

4. One nation one tax was just a political jumla

This is probably the most common GST myth doing regular rounds of social media. Many people are confused with the terms SGST, CGST, and IGST. For example, a typical restaurant bill now mentions both 9% SGST and 9% CGST which is the main source of confusion. However, the truth is that both SGST and CGST are part of the same tax. If the rate is 18 % percent for instance, SGST denotes the part that goes to the state and CGST is the part that goes to centre.

5. Temples do not need to pay GST, but Churches and Mosques do

The Finance Minister himself had to issue a clarification on this one. In the below tweet, he made it amply clear that there is absolutely no truth to this rumour. There is no segregation in the GST law on basis of religion or caste. Religious services like pilgrimage, performing religious ceremonies, and renting of religious precincts continue to be exempt. This exemption is irrespective of the religion.

6. You need to pay GST twice if you pay electricity bills through credit cards

Doubly untrue. First of all, there is no GST on electricity. Also, there is no GST on making expenditure through credit cards. Out of all GST myths, this one is as false as it gets.

7. I need a computer and internet connection to comply with GST

This is a concern for those who are not too tech-savvy. But, there is no need for concern. It is possible to prepare GST invoices manually also. Moreover, you need an internet connection only when filing GST returns and not otherwise.

8. I need a permanent GSTIN to start doing business

Your provisional ID is your permanent GSTIN. If you have a provisional ID, you can start business without waiting anymore. You also need this provisional ID for migrating to GST.

9. Tax rates are much higher now and India has the highest GST rate of 28 %

It only appears so. Earlier there were many different indirect taxes which have been merged into one now. That is the reason that the combined rate appears much higher now, when in fact, it is not. As for the tax rate of 28 %, India has different slab rates for different items out of which 28 % is the highest. It is applicable to items like small cars and SUVs. 81 % percent of items fall under the slab rate of 18 % or lower. It is noteworthy that many food items come under the tax slab of 0 % and alcohol is outside the purview of GST altogether. There are many food items which were taxed at the rate of 5 % and now fall under the 0 5 tax slab. Palmyra jaggery, salt of all types, and cereal grains are some such items.

10. There are so many returns to file

Earlier there were VAT returns, TDS returns, Service Tax returns, Excise returns and so on. Now, instead of filing separate returns for different types of indirect taxes, you only need to file GST returns. So, the situation is quite opposite. There were so many types of returns to file earlier. Now, you have only GST returns to worry about.

Conclusion

While most of these GST myths indeed turned out to be myths; some had a little truth to them as well. Gold is definitely more expensive now and in some cases, commodity prices have increased. However, an overall analysis shows that most GST myths are indeed myths. In the time of social media, it is easy to see and believe misleading reports. So, it is more important than ever before to stay informed and not believe every report that you come across.